Assets are funds that are used in the course of either purchasing or refinancing a property, and are put toward items such as down payments, closing costs, and, depending on the mortgage program, some type of financial reserve.
Assets can come from a variety of sources: your checking and savings accounts, IRAs, and company retirement plans are the most frequently used sources of funds.
However, what many buyers don’t realize is that there are a number of things that one may think of as assets that can’t be used in the mortgage process.
These include valuable items such as cars, boats, jewelry, and art collections. They could be turned into cash, if necessary, to make a mortgage payment, but they and other valuables are excluded from a lender’s definition of an asset.
Other sources of assets you can tap into include gifts from donors, which include close relatives (by marriage or blood).
You can use a gift as an asset if the donor first signs a lender-provided gift letter, indicating that there is no expectation of repayment of the funds being used in the transaction.
Then the funds must be sourced: the donor is required to prove that he or she has the ability to donate the money. Usually this entails showing the lender a bank statement or other correspondence from the bank that indicates what the average balance in the account has been over a period of time. This will confirm that the gift amount wasn’t deposited just prior to the gift being made.